4 Easy Credit Card Resolutions That Anyone Can Keep
If you think about it, January 1 is a lousy time to start new resolutions. To be productive on the first day of the year, you’d have to have a sensible dinner and go to bed early the night before. And I'm sure everyone does that on New Year’s Eve, right?
I’m guessing the answer is no. I think it’s much better to spend the first week of 2013 getting enough sleep and thinking about what you want to accomplish financially in 2013. (See also: Money Resolutions: 6 Ways to Take Control in 2013)
I also think it’s essential that you make resolutions that are doable. One reason people don’t keep resolutions is because they make them almost impossible to attain, such as making a vow to go to the gym every single day. While this goal is admirable, unless you're childless and have perfect health, there will be days when you just can’t go.
So I’ve come up with some credit card resolutions that are so easy, anyone can do them. Yes, even a caveman.
Resolution #1: Adjust Your Budget to Reflect the Tax Increase
You know what the fiscal cliff drama reminds me of? A cartoon where a character goes over a cliff and then, through the magic of animation, reverses course in midair and jumps back to safety at the top of the cliff. The Road Runner and that coyote character come to mind.
Well, the politicians “sort of” went over the cliff and then tried to pretend it wasn’t a big deal by drawing up legislation to reverse some of the damage. Oh brother.
So here’s your immediate concern with all this — your social security taxes will go up about 2%. So your first order of business is to adjust your budget to reflect the decrease in your take-home pay.
Here’s how this connects to credit cards. Many of us (raising my hand) use credit cards routinely. I use a cash-back card when I buy groceries. A friend of mine pays for everything possible with an airline miles card.
Since you’ll pay a little more in taxes, you need to account for that in your budget, especially for items that you pay for with a credit card. If you make $60,000 a year, expect to pay around $1,200 more in annual taxes. OK, so you’ll need to tweak your budget and account for the loss of about $100 a month.
That means you’ll need to reduce the amount you can put on your cards (unless you have the cash flow to cover the $100). I just don’t want you to end up paying interest expense because you were surprised that your take-home pay was reduced.
Resolution #2: Take Steps to Get Out of Credit Card Debt
Notice I didn’t say get out of debt entirely in 2013? Hey, if it’s possible, go for it. If you’ve got excellent credit, then your first step might be applying for a balance transfer credit card with a zero percent intro APR.
But for many folks, the debt is too big to eliminate in one year. I was once in debt, and I had to spend two years chipping away at it. I ate a lot of peanut butter and jelly sandwiches during those two years.
What should your goal be? Research shows that if we choose specific goals that are challenging, yet attainable, we’re more likely to succeed. You have to find that sweet spot where you suffer a little, but not too much.
OK, so say you’ve got $10,000 in debt, and you can throw $300 a month at it if you cut back a little on restaurants and movies. Set a goal of cutting your debt by at least 30%. Believe me, by the end of the year, you’re going to feel pretty good. And the positive momentum of debt reduction will probably carry over into 2014.
Resolution #3: Be Your Own Consumer Advocate
Has this ever been more important? I do what I do for a living because, ultimately, I believe consumers need someone in their corner looking out for them.
For crying out loud, you almost need a legal degree to get through the fine print on credit cards. It’s ridiculous! But I do think there are a lot of things you can do on your own to protect yourself.
We’ve seen a rocky economy for the past few years, and this has brought out the seedy underbelly of the credit world. But even if you can’t qualify for the best credit cards, you can protect yourself by empowering yourself with knowledge.
Before you apply for a card, read the fine print so you aren’t surprised by the fees. Then do a Google search on any credit card you’re considering and find out what other consumers are saying about it.
And if a credit card issuer has done you wrong and they won’t fix it, take matters into your own hands. As long as you’ve made a good faith effort to work out the problem with your issuer, the Consumer Financial Protection Bureau (CFPB) will help you.
Remember, you’re the one in charge of your credit life. The CFPB has your back, but you have to take the first step and file a complaint.
Resolution #4: Don’t Waste Your Rewards
Did you know that Americans accumulate miles and points that are worth about $48 billion annually? And according to a 2011 study by COLLOQUY, a third of these rewards — roughly $16 billion — go unredeemed.
Just wow, right? I don’t waste any of mine. Yeah, I’m super cheap, and so I’m OCD about my rewards. I’m not one of those rewards hackers or junkies because I just don’t have the time to play the system and win the way these folks do. It’s darned impressive the way some folks squeeze every bit of rewards out of a program.
But that’s not me, so I make the most of the rewards I earn. Now, this kind of ties into Resolution #3. You have to be the one who reads the fine print about the rewards program so you know how to take advantage of it.
What Are Your Resolutions?
One of my personal goals in 2013 is to cut back on restaurant expenses and eat at home more often. This, not coincidentally, ties into my goal to eat better in 2013. I kind of blew off the first week of January, but now I’m ready to make the effort and determined to keep my resolutions.
So have you made any resolutions for 2013?